I'd think it's from a set of customs and traditions that passed down from the middle ages, where nobles would have their own unique banners and coats of arms. Coats of arms and banners were adopted for kingdoms, and eventually for the nation states that succeeded them, carrying on the method of handling the banners or flags with respect to those whom they represented (you would treat the British flag with respect out of respect for the King, for example).

This leads to customs such as not letting the flag touch the ground, not being defaced, not being used as clothing or a container, and other practices.